Survey of Former IDA Program Participants: How Do They Fare?

Abstract
While a number of studies have examined the savings performance of participants in the Individual Development Account (IDA) program, research about long-term program outcomes is limited. To fill this void, we present findings of a survey of IDA participants' asset holdings after they left the IDA program. Results document that those who successfully complete the IDA program report higher levels of asset ownership after completing the program, compared to those dropping out of the program prematurely. This supports the view that IDA programs affect the dispositions and behaviors necessary to successfully maintain a home, complete post-secondary education, and establish a small business.

Department of Consumer Sciences
The Ohio State University
Columbus, Ohio

Introduction

While a number of studies have examined the
savings performance of participants in the Individual Development
Account (IDA) program, none of the research has decomposed the
long-term outcomes. To fill this void, this article presents findings
of a survey of IDA participants' asset situation after they left the
IDA program. The research builds upon an expanding body of research
that analyzes the effectiveness of the IDA programs (see Schreiner &
Sherraden, 2007, for an overview). Key themes in this literature
include assessing program structure and related federal regulation
(Richards, 2003; Rom, 2005; Sherraden, 2000; Shobe, 2002), analyzing
participants' characteristics (Mills, Gale, Patterson, &
Apostolov, 2006; Reutebuch, 2001; Rohe, Gorham, & Quercia, 2005),
and determining the program impact in various life situations
(Grinstein-Weiss, Wagner, & Ssewamala, 2006; Grinstein-Weiss,
Zhan, & Sherraden, 2006; Shobe & Boyd, 2003; Shobe &
Page-Adams, 2001).

Less effort has been dedicated to
understanding the long-term effectiveness of the IDA programs on
family wellbeing beyond the time spent in the program. Work by
Schreiner and Sherraden (2006) is an exception, though this work uses
data on current program participants to estimate their future
wellbeing. In fact, none of the aforementioned works deal with the
long-term benefits of IDA programs or how programs could be improved
to increase financial literacy and family wellbeing using insight
from former program participants. Specifically, we aimed to answer
three specific questions:

Does IDA program participation help
individuals maintain a home, complete post-secondary education, and
establish a small business?

What factors cause IDA program dropout?

How do successful program participants
differ from those who left the program prior to completion?

To address the research questions, a survey
of all former IDA program participants of agencies affiliated with
the "Assets Ohio" network of the Ohio Community Development
Corporation (CDC) Association was conducted.

Eligible respondents were IDA program
participants who saved in an Individual Development Account since
the program's inception in 1999, including successful graduates and
former participants who left the program prematurely.

A total of 465 former program
participants were contacted by mail and invited to participate in a
paper-and-pencil survey.

The questionnaire, mailed in April 2007,
consisted of 26 questions (19 questions for program dropouts).

A total of 164 individuals (or 43% of
successful contacts) completed the survey.

Demographic Characteristics

The demographic characteristics for both the
full sample and divided by IDA program graduates (77% of respondents)
and dropouts (23%) are presented in Table 1. The two groups,
graduates and dropouts, differed in some significant areas. Graduates
had a higher formal level of education, reported a higher annual
post-program household income, and were more often fully employed.
IDA graduates had significantly higher post-program financial assets
than dropouts.

Asset Holdings

Below we describe the assets purchases made
by program graduates. We also present the most common reasons
dropouts reported for leaving the IDA program.

Asset Ownership: Homeownership

A total of 110 survey respondents sought to
purchase a home with their savings (67.1%). Of those 110, 83
graduated from the IDA program (75.5%), and 27 dropped out before
graduation (24.5%). Of the graduates, all but one respondent still
owned the home they purchased with the IDA funds. Table 2 summarizes
the findings.

On average, respondents reported experiencing
between one and two housing problems included in our list of 12
possible problem areas. As presented in Figure 1, the five most
common housing problems were, in order, damp areas, walls, floors, or
foundation; heat or cooling system malfunctions; insufficient space;
electrical problems; and leaky roofs.

Asset Ownership: Post-Secondary Education

A total of 24 respondents used their savings
to fund higher education expenses (14.6%). Of those 24 respondents,
23 graduated from the IDA program (95.8%), and 1 dropped out before
graduation (4.2%). Of the 23 IDA program graduates, 9 have graduated
from school, 12 are still enrolled in their programs, and 2 left
their educational program without a degree at the time of the survey.
The two reasons given were related to the subject matter (poisoning
during chemistry home study course) and an inability to combine work,
family, and school (Table 3).

Hard to pay school
expenses in past year (N=17): 3.18 (1.015; 1= every month, 5=
never)

Note: N=23

Asset Ownership: Microenterprise

A total of 22 respondents participated in the
IDA program to save for a small business venture. Eighteen
respondents still owned their small business (78%). Four of the 22
respondents could not sustain their small business (22%), listing
personal (husband passed away), customer-related (no or late payments
for services), and market-related (bad timing of venture) reasons as
the most common causes of business failure. Other reasons were
stronger than expected competition, more cash-out flow than in-flow,
and higher cost than expected (Table 4).

Hard to pay business
expenses in past year (N=12; 4.00 (1.348) 1= every month, 5=
never)

every month

5.6% (1)

every other month

5.6% (1)

three or four times

5.6% (1)

once or twice

16.7% (3)

not at all

33.3% (6)

Note: N=18

Asset Ownership: Control Group

The study's control group consisted of the 38
respondents who started an IDA program but left the program before
completion. Of those 38 individuals, 25 (66%) have not purchased the
asset they were saving for in the IDA program. Of the eight
individuals who did purchase the asset, all of them have maintained
ownership (Table 5).

As presented in Table 4, the main reasons for
leaving the IDA program were unforeseen expenses, unpaid bills, or
large upcoming expenses. Other reasons for leaving the IDA program
were:

Regression analysis is the perfect tool to
combine all these measures into one single analysis. We conducted OLS
regression analysis to identify the measures that influence household
financial assets (R-Square=0.530, F=5.949, p<0.000). The
explanatory variables include the above-mentioned psychological,
financial, and demographic measures. Controlling for these variables,
the regression results showed that six variables were related to
financial wellbeing. Participants with higher household financial
assets were more likely successful IDA program graduates (p=0.006),
were white (p=0.002), had children under 18 (p=0.082), were employed
full-time (p=0.098), owned an investment account (p=0.000), and were
more considerate of the future consequences of their actions
(p=.006).

Key Findings

The key findings of the survey include the
following.

Compared to program dropouts, successful
graduates reported in the survey a higher annual household income,
more likely being full-time employed, and more likely owning an
investment account. Importantly, IDA graduates had significantly
higher post-program financial assets than dropouts.

Of the respondents who graduated from
the IDA program, all but one still owned the home purchased with the
IDA funds.

Of the respondents who saved for higher
education, only two left their educational program without a degree.

Three-quarter of respondents who saved
to open a small business were able to sustain it.

Program graduates reported only slightly
higher tenancies towards the likelihood of future events, ability to
control impulsive behavior, and capability to attain goals. They
experienced marginally fewer difficulties to cope and less lifestyle
deprivation.

The majority of both program graduates
and dropouts were the primary financial decision makers for their
household.

Inquiring about the past and future
financial situation, program dropouts reported a significantly more
positive outlook toward their financial future.

Survey participants reporting higher
levels of financial wellbeing and were more likely to own an
investment account, be white, have graduated from the IDA program,
have children under 18 living in their households, be more
considerate of the future consequences of their actions, and be
employed full-time.

Recommendations

These key findings lead to the following
recommendations for program development strategies to further family
wellbeing after people leave the IDA program.

Provide extra support to minorities and
people with job problems. Our findings show that non-white
respondents and those with less than full-time employment are less
likely to accumulate a financial cushion after they leave the IDA
program.

Teach participants the importance of
opening an investment account. Owning an investment account was the
most important predictor of post-program financial wellbeing. The
IDA program providers may consider providing information about
employer-sponsored retirement plans and investment accounts at
low-cost investment houses during their financial education and
counseling sessions.

Emphasize the importance of future
events. Respondents who believed certain economic behaviors are
worthwhile because of future benefits, even if immediate outcomes
are relatively undesirable or even if there are immediate costs,
were able to accumulate higher household financial assets. IDA
programs may develop strategies to train participants the skills to
forfeit immediate benefits like convenience or pleasure to achieve
more desirable future states.

Teach skills that help in coping with
situations of limited resources. Among successful program graduates,
those who had difficulty coping with limited resources were less
successful in accumulating financial assets. IDA programs may offer
trainings to participants that develop participants' skills in
coping with perceptions of inadequacy with their financial position
and with financial concerns and worries.

Encourage formal education. A
significant predictor of program graduation was the level of formal
education. IDA programs may consider providing information about
financial aid and economic access programs to their program
participants as a part of their regular financial education and
counseling sessions.

Readers interested in an in-depth analysis of
IDA program characteristics and their effectiveness for long-term
saving may be referred to Loibl, Grinstein-Weiss, Zhan, and Red Bird
(in press).

Limitations

Only 35% of all former IDA program
participants in the Ohio CDC Association participated in the survey
reported here. Readers should be aware that the findings might not
correctly represent the situation of the whole group of former IDA
program participants.

Acknowledgement

The financial support of the Ohio CDC
Association and Ohio State University Extension is gratefully
acknowledged.

Hilton, J. M., & Devall, E. L. (1997). The family economic strain scale: Development and evaluation of the instrument with single- and two-parent families. Journal of Family and Economic Issues, 18(Fall), 247-271.